[SMM Analysis] Market Sentiment Marginally Recovers, Lithium Carbonate Destocking Accelerates

In the spot market, the SMM average spot price of battery-grade lithium carbonate was 91,700 yuan/mt on Thursday, down 4,400 yuan/mt from 96,100 yuan/mt the previous Thursday, a weekly decline of 4.6%. In futures, the most-traded lithium carbonate contract opened lower and moved higher on Thursday, with a slight correction from the intraday high in the afternoon, closing up 3.64% at 91,580 yuan/mt, up 3.64% WoW from the previous Thursday.

Supply side, China's lithium carbonate production continued to increase this week, but the growth narrowed WoW. By raw material, spodumene-based production continued to rise this week as lithium ore arrivals persisted alongside new production line ramp-ups, though the increment narrowed slightly; lepidolite-based production edged down; salt lake and residue-based lithium weekly output slipped slightly; in recycling, LFP grinding enterprises showed improved inquiry activity, but high cost pressure still constrained transactions, with overall market trading mediocre; ternary black mass transactions remained normal with no significant changes. For LCO black mass, affected by the slight correction in refined cobalt prices this week, enterprises that had previously suspended external purchases resumed buying, while sellers maintained mainstream market quotes with strong willingness to hold prices firm, though downstream acceptance was moderate. Overall, the prolonged production cuts in the recycling segment have stabilized, but some enterprises under maintenance have yet to resume production.

Demand side, from market transactions and inventory conditions, upstream lithium chemical plants still mainly shipped under long-term contracts, but willingness to sell spot orders improved from earlier, while downstream spot purchases remained primarily need-based with low trading volume. Cathode plants did not build excess inventory and basically maintained supply security; precursor production schedules for November declined notably; weak demand at the battery cell end led electrolyte enterprises to continue digesting earlier inventory and delay restocking. All segments focused on proactive inventory control, driving synchronized destocking. This week, lithium carbonate inventory stood at 125,391 mt, down 2,994 mt WoW, with the destocking pace widening from the previous week.

This week, futures opened lower and moved higher, closing up 3.64% on Thursday at 91,580 yuan/mt, while the average spot price was 91,700 yuan/mt, down 4.6% WoW, extending the downtrend though the futures rebound provided some repair to market sentiment. Supply-side production continued to grow but the increase narrowed MoM, with sustained lithium ore arrivals and new production line ramp-ups remaining the main sources of growth. In the short term, the futures rebound and accelerating destocking have bolstered market confidence, but demand has yet to show a clear recovery and downstream players remain cautious in inventory control. Lithium carbonate prices are expected to trade in the range of 82,000-105,000 yuan/mt.